I need clarity on loan to shareholders.
If a company has a debit loan with a shareholder (Ie. The shareholder owes the company money) do you have to put interest on that loan ?
Would it matter if it was a credit/debit loan ?
I have heard that the first year of a loan does not have to have interest on it. Is this true ? Cant find anything in legislation with regard to this.
According to the Income tax act, if you have a loan that does not have interest it will be a deemed dividends. To avoid this interest must be put on loan accounts at a market related rate.